So my question is what happened in 2004 once the Fed raised the discount rate to push the American private sector to relax lending standards precisely at THAT moment. We all know that Fannie Mae and Freddie Mac were responsible for relaxing lending standards in general but I thought they were already doing so in 2001-2005. It seems that all rational assessment of Risk by bankers is lost between 2004 and 2006 so this would be in line with the Weltenschaung of those years.
As the housing bubble continued to expand with government-mandated relaxation of lending standards, resulting increases in home equity spurred the acceleration of irrational lending practices. Remember all those "home equity loans" commercials pre-2008? The madness of irresponsible lending and borrowing exacerbated the bubble even further, all the while creating the kind of overleveraging of debt which ultimately consumed the investment banks and wiped out derivative investments. IMO.
So my question is what happened in 2004 once the Fed raised the discount rate to push the American private sector to relax lending standards precisely at THAT moment. We all know that Fannie Mae and Freddie Mac were responsible for relaxing lending standards in general but I thought they were already doing so in 2001-2005. It seems that all rational assessment of Risk by bankers is lost between 2004 and 2006 so this would be in line with the Weltenschaung of those years.
bdweightexer 2 years ago
As the housing bubble continued to expand with government-mandated relaxation of lending standards, resulting increases in home equity spurred the acceleration of irrational lending practices. Remember all those "home equity loans" commercials pre-2008? The madness of irresponsible lending and borrowing exacerbated the bubble even further, all the while creating the kind of overleveraging of debt which ultimately consumed the investment banks and wiped out derivative investments. IMO.
Mambovista 2 years ago
great video ...thanks alot
uaefx 3 years ago
wish my economics professor was like this
echopper1 3 years ago 10
he would be fired by university because his explanation is too easy to understand :)
unworldlything 3 years ago 17
Thanks so much for this. Is there a section missing at the end of this/start of part 4?
cpspam 3 years ago